Regional Development Organizations

Most businesses understand that economic strength and prosperity are generated at the regional level. And the relevance of local, state, and national political boundaries as economic units is continuing to erode. That is, what happens in Tijuana may be more important to San Diego’s economy than what happens in Chicago, or even San Francisco.

Federal economic development officials seem to be hearing this message because the last several years have been a boom time for the creation of new regional development organizations. It used to be that only one federal regional development body existed: the Appalachian Regional Commission (ARC) (www.arc.gov). But in the past few years, three other regional bodies have been established through acts of Congress

The Northern Great Plains Authority (recently established by the Farm Bill)

Meanwhile, two other regional bodies are being considered in Congress. U.S. Sens. Jeff Bingaman (D-NM), Kay Bailey Hutchison (R-TX), and U.S. Rep. Silvestre Reyes (D-TX) have introduced a proposal (S. 2522/H.R. 4847) for a Southwest Border Authority to promote economic development in the border regions of Arizona, California, New Mexico and Texas. And U.S. Rep. Mike McIntyre (D-NC) also has introduced a bill (H.R. 3618) to create the Southeast Crescent Authority (SECA). SECA would assist economically distressed communities in the states of Alabama, Georgia, Florida, Mississippi, North Carolina, South Carolina, and Virginia.

At first glance, this boom in regional development authorities seems somewhat surprising. While Congress and the federal government have a long history of support for regional bodies, like the Tennessee Valley Authority (TVA), it had largely avoided creating any new authorities since the late 1970s. Indeed, the TVA and the ARC were among the few holdovers from previous interest in regional development strategies.

What has caused the change of heart? A recognition that regions are the key unit of the 21st century economy is probably the primary cause, but other factors are at work, too. A second factor is the growing body of evidence that regional solutions work. For example, evaluations of the ARC have found that its investments have played a critical role in reducing poverty and generating economic activity in the 13-state Appalachian region. Thanks in part to ARC investments, economic-distress levels in many parts of the region have been cut in half.

In addition, historic patterns of regional development and underdevelopment also have played a role. Pockets of poverty and economic distress exist today across the United States. For example, inner city neighborhoods and Indian reservations continue to suffer high unemployment and poverty rates. Yet when economic data are examined over time, one finds that only a handful of regions have consistently suffered from high levels of poverty, unemployment, and economic distress. These regions are located in Appalachia, Alaska, the Southeast, the Mississippi Delta, the Northern Great Plains, and the Southwest Border regions. Thus, it is no surprise that these regions would also be candidates for focused economic development initiatives.

The need for targeted assistance is profound. Consider the Mississippi Delta. Poverty levels in the Delta are significantly higher than national averages (18.5 percent in the Delta vs. 13.2 percent nationwide). And per capita incomes are significantly lower. The Delta’s 1999 per capita income was $22,611, which is roughly three-quarters of the U.S. average of $28,456.

The most important question for these new regional development authorities is whether they can make a difference. While each new authority has some unique characteristics, most are based on the ARC’s proven model. Under this approach, a partnership between Washington and the governors manages the authority and makes key decisions. Projects are developed at several levels: region-wide, by state, and from local initiatives. They can include traditional projects like highways and other infrastructure, or can be used to fund training, business assistance, or other forms of technical support. Funding for projects comes from federal, state, and local sources. In some cases, the organizations control fairly significant amounts of funding. For example, the Denali Commission will manage more than $65 million in FY2002 funding; ARC non-highway funding for FY2002 is approximately $71 million.

So, the need is there. Simply recognizing this need is not enough. Effective leadership and program design are essential as well. Capacity building should be the buzzword for these efforts. Many of the regions already receive substantial federal dollars, but these investments tilt heavily toward income security and agricultural payments; funding to build a sustainable economic base is limited. Programs that foster entrepreneurship, provide technical assistance, and encourage private sector investment must receive priority attention. Simply shifting decision-making authority to the regions is not enough; a new focus for federal investments also is needed. That’s the best way to ensure the support of these new experiments in regional development.

Note: We are indebted to Rick Reeder for sharing a copy of his paper on the Delta Regional Authority. Rick is the author along with Sam Calhoun of “Regional Development Commissions: The Case of the Delta Regional Authority,” which was prepared for the Southern Regional Science Association Meeting, 2002. This paper is available by e-mailing rreeder@ers.usda.gov.

This NCOE Update article was written by National Commission on Entrepreneurship on 2/28/2005

Welcome to NCOE Update — a bi-weekly report on economics and the entrepreneurial economy. Through NCOE Update, we bring you short summaries and analyses of trends and transformations driving the New Economy. We welcome your input and suggestions for how we can improve this service. In addition, please feel free to share this with friends and colleagues. To subscribe or unsubscribe, send an email to ncoe@sso.org.

Young Entrepreneurship

Are you a young Entrepreneur? If so, we encourage you to check out our young Entrepreneurship resource center, full of the articles and information you need to help you generate ideas and start your own business as a young Entrepreneur. Or find more information at the Kauffman Foundation for Entrepreneurship or the Entrepreneurship Resources at Entrepreneurship.org